Web services monetization: business models

We spent a few hours exploring Webware 100 Top Web Apps 2008 online services and studying their business models. The following diagram shows the results of the study - 34% of services use an advertising model, 12% different subscription schemes, 8% sell virtual goods (most often in the form of data for download), the same share of services offers related products (usually large development companies offer a free option product to attract to their platform) and another 8% of services use a “pay per use” scheme.



Business models
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	Model	Option	Description
I	Immediate income		Models for extracting a permanent income (self-sufficiency models)
IS	Subscription		A regular, periodic fee is charged to the end user. Take into account: • Minimum contract term • When paying for access to X (days, months, weeks) Y (days, months, weeks) gets free • The first X (days, months, weeks) for free ('evaluation period') • Discount periods • Charge for disabling advertising • Fee for additional (premium) content • Fee for access to API / advanced features • Support fee
ISF		Fixed	Fixed subscription price (for example, access to an online magazine or service).
ISV		Variable	A set of different subscription options with a fixed price available to the end user; the price is determined by subscription features, restrictions on use, etc. This option includes the “Freemium” model; (usually limited) free option with one or more paid options.
IT	Third Party Support		The end user receives the service for free. Third parties pay for the service provided.
ITA		Advertising	One or more third parties place advertisements clearly marked on the site or inside the web application. Advertising options include graphic banners, text ads, lowercase ads, inter-section ads, etc. Typically, the cost of advertising is determined for the transition, for a specific action or per thousand impressions.
ITS		Sponsorship	One or more third parties (companies) become official sponsors of the site. This may include permanent (noticeable, without rotation) sponsor advertising, sponsor site branding (colors, slogans) and / or sponsor license agreements.
ITC		Paid content	Advertising materials (Advertorials): companies pay for placing their marketing materials on the site.
ITP		Paid accommodation	Companies pay for inclusion in the list of participants (for example, comparisons, reviews).
ITR		Referral system	End users are directed to the sites of other companies that pay the site for transactions of the transferred users (for example, comparative sites).
ITL		Content licensing	Other persons and companies are granted access to reuse site information for their own purposes.
IP	Payments		The user personally makes transactional acquisitions.
IPU		Pay-for-use	Micropayments: the end user pays for using the online service (for one-time access or access for a limited time). This includes a brokerage model when the user pays a fixed fee or interest for each transaction (for example, ebay). It also includes the purchase of “credits”, for example, 10 service uses for a fixed price. Discounts for bulk purchases may be offered.
IPP		Real goods	The usual e-commerce model is selling books, CDs, tickets, etc. Usually each “physical product” has a fixed cost associated with the method of its production.
IPV		Virtual goods	The user buys a “digital” product, with a negligible cost of replication. This includes virtual gifts (for example, Facebook), in-game items (for example, World of Warcraft), and other virtual assets (for example, land in Second Life).
IPR		Related products	The user has free access to the main product / service. A separate, optional fee is charged for related products / services with added value, such as documentation, support, commercial versions of the application for the iPhone or Android, etc.
IPD		Donations	The site relies on donations from end users.
L	Long-term income		Strategic models of “invest and get a reward”, where the initial investment is unprofitable against the background of a longer return on investment.
LE	Build and exploit		Create a well-established audience before monetizing.
LER		Reuse / Resale	Resell / reuse data and content, usually from sites with user-generated content (User Generated Content), for example, create books, posters and other items that can be purchased from data / content created on the site.
Lep		Platform	Create a platform, then charge for its use from third parties, after an audience of users, such as an iPhone, as well as Facebook has been created.
LEB		Branding	Create a personal brand for yourself / your company. When the high awareness of users about your brand is achieved, go to the cycle “Conferences - Desktops - Expert”, publish a book, etc.
LS		Sale / Leaving the market	Create a popular app / website and then make it monetize the problem of another person, such as YouTube.

Meta models

The following business models can be applied in addition to most of the basic models described above.

	Model	Options	Description
MR	Revenue sharing		Users are offered monetary incentives to increase the income generated by the site / application, by sharing with it a certain percentage of income (usually assessed by the user's content content or his personal referrals).
MR	Reseller		The user may resell the online service.
MRA		Affiliate system	The user receives a fee for directing consumers to the site, usually at the expense of selling / placing goods / services on other resources.
Mrw		Private label	The user can brand the online service on his own and resell it as his own (usually receiving a percentage of the income, or paying a fixed fee to the original service and independently determining the sales prices).